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Exam 9: Deductions: Employee and Self-Employed-Related Expenses

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Question 31

Multiple Choice

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Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Cutback adjustment does not apply

A) Cover charge paid to entertain client at a night club.
B) Deductible even if taxpayer does not take the new job
C) Company picnic sponsored by employer
D) Use of Federal per diem allowance to substantiate meals while in travel status
E) Does not have to be job related
F) Can include cost of car insurance and automobile club dues
G) Distribution from plan is taxable
H) Distribution from plan is not taxable
I) Expatriate (U.S. person who is employed overseas) returns home to retire
J) Taxpayer moves to a new residence 55 miles closer to his present job
K) Country club membership fee
L) Correct match not provided

M) I) and K)
N) A) and J)

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Question 32

Multiple Choice

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Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. -Sue has unreimbursed expenses.

A) Indicates employee status.
B) Indicates independent contractor status.

C) A) and B)
D) undefined

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Question 33

True/False

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For self-employed taxpayers, travel expenses are not subject to the 2%-of-AGI floor.

If a business retains someone to provide services, that person may either be an employee or be self-employed (i.e., independent contractor). a. What are the tax advantages to the business of having the service provider classified as self-employed? b. What are the advantages and disadvantages to the service provider of self-employed status?

Which, if any, of the following expenses is subject to the 2%-of-AGI floor?

In terms of meeting the distance test for purposes of deducting moving expenses, which of the following statements is correct?

A direct transfer of funds from a qualified retirement plan to an IRA is subject to the withholding rules.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. -The services are performed at Sue's premises.

Christopher just purchased an automobile for $40,000 which he plans to claim 100% as being for business use. In order to take advantage of MACRS and § 179, he plans to use the actual cost method for determining his deduction in the first year. In subsequent years, he will switch to the automatic mileage method. Comment on Christopher's proposed approach.

Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Club dues not deductible

Match the statements that relate to each other. (Note: Choice L may be used more than once.) -Deductible job-hunting expenses

Under the regular (actual expense) method, the portion of the office in the home deduction that exceeds the income from the business can be carried over to future years.

Sue performs services for Lynn. Regarding this arrangement, use the legend provided to classify each statement. -Sue files a Schedule SE with her Form 1040.

For tax purposes, "travel" is a broader classification than "transportation."

Meg teaches the fifth grade at a local school. During the year, she spends $1,200 for school supplies for use in her classroom. On her income tax return, some of this expense is not reported and the balance is deducted in two different places. Explain what has probably happened.

Contributions to a Roth IRA can be made up to the due date (excluding extensions) of the taxpayer's income tax return.

When contributions are made to a traditional IRA, they are deductible by the participant. Later distributions from the IRA upon retirement are fully taxed.

A participant who is at least age 59 1/2 can make a tax-free qualified withdrawal from a Roth IRA after a five- year holding period.

A taxpayer takes six clients to an NBA playoff game. If all of the tickets (list price of $120 each) are purchased on the Internet for $1,800 ($300 each), only $60 ($120 × 50% cutback adjustment) per ticket is deductible.

For tax year 2013, Taylor used the simplified method of determining her office in the home deduction. For 2014, Taylor must continue to use the simplified method and cannot switch to the regular (actual expense) method.